The Securities and Exchange Commission (SEC) has instituted a significant procedural shift regarding its investigations. Under the new leadership of Republican Mark Uyeda, supported by Republican Hester Peirce and Democrat Caroline Crenshaw, the SEC now requires enforcement staff to obtain the Commission's approval for all formal orders of investigation. This change, implemented since President Donald Trump took office, marks a departure from recent practices where enforcement directors or senior staff could independently launch investigations.
Previously, under chair Gary Gensler and fellow Democrat Jaime Lizárraga, who both departed last month, the SEC allowed supervising attorneys below the enforcement director to issue formal orders. The current change mandates Commission approval, which is essential to issue subpoenas for testimony or documents. Notably, this move has not been publicly disclosed nor reported until now, with an SEC spokesperson declining to comment on the development.
Steven Peikin, a former SEC co-director of enforcement, speculated that such procedural adjustments could occur under the new administration. He expressed skepticism about the effectiveness of this change.
"I think it's a huge waste of commission resources to be focused on formal order authority." – Steven Peikin
Despite this new requirement, SEC enforcement staff retain the ability to conduct informal investigations without needing formal approval. They can continue to send requests for information, ensuring that investigative processes are not entirely stalled.
Under the previous administration during Trump's term, the SEC mandated that both of its two enforcement directors approve formal probes. The implications of this latest procedural adjustment remain uncertain, but it is among the first enforcement changes under the new leadership, which is anticipated to adopt a more industry-friendly stance.
The SEC now comprises three members — two Republicans and one Democrat. This composition suggests a potential shift in priorities and strategies within the Commission's enforcement division. As this procedural change unfolds, its impact on the SEC's operational efficiency and regulatory effectiveness will be closely monitored by industry observers and stakeholders alike.
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